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In the first post I talked about unequal impact of digitization (or digital technologies) on different sections of consumers. I had emphasized that people living in rural areas need assistance to extract the benefits of digital technologies. Assistance that would help them bridge gap with digitally-savvy urban consumers who share the enormous benefits.

Like rural consumers, the industry group of Micro, Small and Medium Enterprises (MSMEs) too need assistance to extract the benefits of digitization. The MSME sector has emerged as a highly vibrant and dynamic part of the Indian economy. It continues to play a crucial role by providing vast employment opportunities at comparatively lower capital cost as compared to large industries. The sector also helps in industrialization of rural and backward areas, thereby assuring more equitable distribution of national income and wealth. The MSME sector contributes around 37% of India’s Gross Domestic Product (GDP) and encompasses over fifty million companies and entrepreneurs accounting for a vast bouquet of products/services that address both domestic and export markets.

When digital upsets the equilibrium

Today, all businesses, large and small, are getting impacted by digital technologies and they cannot afford to ignore the sweeping change. The MSME sector too is struggling to make sense of the opportunities and challenges presented. This is in contrast to the confidence and ability of large enterprises that have the wherewithal to invest in the necessary infrastructure and get the best advice in the business. For example, organized retail (like Reliance Fresh, More, Heritage Fresh and others) and online e-commerce firms (Flipkart, Amazon etc.) have employed digital technologies to cut into the business of millions of kirana shops dotting the country, especially the rural markets. By themselves, MSMEs do not have the ability or the capacity to face the onslaught on their livelihoods. In short, this exciting and vast sector is essentially isolated from harvesting the benefits of digital technologies.

The fundamental problem

MSMEs are either unable, or slow to adopt digital technologies, not because they do not want to. The problem arises because solutions are not specifically designed and built for this sector. Some of the main impediments include:

· Lack of MSME-specific and cost-effective solutions

· Lack of technology in-house skills and infrastructure

· Lack of easy-to-use interfaces

· Lack of financial capacity to invest in capital expenditure

The assistance MSMEs need

In the context of MSMEs, the need of the hour is assistance in the form of a ‘Total Solution’ to their problems. This can be largely accomplished by re-purposing the same digital technologies used by larger enterprises. This comprises hardware, software, applications, communication bandwidth, simple user interface, training, support, and ease of use – all in a box. This solution package needs to be offered at a very low, affordable and variable cost. Importantly, there should be no fixed capital costs.

Assistance is here

Fortunately, such assistance is coming from different sources in different forms. Both the Governments (center and state) are giving strong support to address the above problems. Industry associations and trade bodies are responding to some of the issues by reducing the friction that occurs on course of adopting digital technologies. Finally, a slew of new-generation companies and start-ups are working overtime to capture a big slice of the opportunity to provide digital solutions to MSMEs.

The Government of India is giving high priority to the role of MSMEs in nation building by creating a separate department of MSME under a cabinet ranked minister. The department evangelizes the use of digital technologies through many initiatives for the sector and also coordinates with other departments and state Governments.

A case in point is the recent launch of an online portal and mobile MyMSME app to monitor different schemes promoted by the Government. The Government has also decided to implement “Digital MSME” scheme for the promotion of digital technologies by adopting Cloud computing. The objectives are to improve their competitiveness, business process standardization and productivity improvement – all through the Cloud platform, thus reducing the burden of investment.

The roll out of Goods and Services Tax (GST) – the new tax regime driven by the Government of India is a good example. It has come up with a Government-to-Business (G2B) portal that acts as a comprehensive platform for taxpayers to conveniently interact with and access the GST System. The portal has opened its application programming interfaces (APIs) so that third party application developers can use them to develop new and innovative solutions for GST compliance and also integrate with existing applications like SAP, Tally and other. Some of these new applications help MSMEs in uploading invoices, information and filing returns as required by GST. Taxpayers can access the secure GST system via desktop, mobile and multiple applications.

Recognizing the crucial need for assistance, the Government has introduced – GST Suvidha Provider or GSP. The Government’s endeavor is to build a vibrant GSP ecosystem and ensure its success by putting in place an open, transparent and participative framework for capable and motivated enterprises and entrepreneurs.

Confederation of Indian Industry (CII), India’s premier industry association, has created an online business resource center called MyCII covering four critical aspects of business operation:

· Business leads

· Industry and regulatory information

· Global and local networking

· Latest industry research and knowledge

This platform has proved to be very valuable to MSMEs.

NASSCOM, not-for-profit industry association representing Information Technology (IT) and Business Process Management (BPM) industry in India, initiated the E-Marketplace (under beta testing) specifically for their MSME members. This platform helps members with their marketing activities and generates leads from United States and Asia Pacific markets.

Even private sector enterprises and new-age startups are offering assistance to MSMEs. For example, CoreLogs offers to help identify potential clients in the IT sector for products and services. Another StartUp, Power2SME is on a mission to empower SMEs and enhance their overall productivity and deliver measurable business value.

The portal helps SMEs to focus on their core business of accelerating growth – both in terms of revenue and development. The challenge is in creating awareness, and then acceptance. This calls for an elaborate and broad-based plan to educate the target audience on the advantages of new digital technologies and their benefits.

Smart MSMEs will do well for themselves if they latch on to opportunities provided by digitization with assistance coming from the government agencies, trade bodies and Start-Up ecosystem.

Assisted Digitization: Part 1

In my decades of experience in the Information Technology sector – as a practitioner, observer and bystander at different stages of my career – l always have been fascinated by the ingenuity of our entrepreneurs to build technology solutions that solve a variety of real world problems.

Mechanization, Computerization and Automation have, over the years, enabled enterprises and individuals to perform efficiently, thus facilitating them to extract a higher return on their investment. In the present day and context, the new and emerging dynamic is Digitization. This refers to the leveraging of digital technologies to increase efficiency, improve quality and reduce human effort.

I’ll be elaborating on the impact of Digitization on various aspects of our life through a series of articles. To begin with, I shall deal with the effects of Digitization on rural consumers in this post.

Unequal impact: Where it all starts

Being the early adopters, large businesses and enterprises have been the first to embrace digital technologies, and continue to extract manifold benefits from them. Technology solution and service providers catering to this section have seen their businesses swell, riding on the back of the industry’s rapid growth.
When it comes to end consumers, digital technologies have had a tremendous impact through smart phone apps, ecommerce, digital market places and ubiquitous social media platforms like Facebook and WhatsApp. These, individually or together, have fundamentally changed the way people work, communicate, commute, buy, engage and entertain.

However, despite the apparent spread of digital devices, there are a few important segments that remain relatively unaffected. One such is a class of consumers, a large and vital section of the society, characterized by:

– People living in small towns or rural areas

– Lacking English literacy

– Cannot afford smart phones

– Experience severe limitations on bandwidth.

This segment constitutes a big business opportunity because of their large numbers and constantly improving purchasing power.

Solution: Bridging the Divide

Though the aspirations of the urban and rural consumers appear to be the same, the execution requirements are distinctly different. Non-metro consumers require a different messaging as compared to communicating with tech-savvy consumers living in metros. Non-metro consumers need assistance. It could be either an individual or a business entity that can help them through the online process. The ecosystem for providing such assistance is now possible, thanks to a series of digital solutions coming fortuitously together due to interconnected developments. These include:

– New technology platforms that reduce time, cost and risk
– Deeper penetration of communication platforms and the Internet
– New business models that are built on charging for usage, thus keeping upfront costs low
– A vibrant start-up ecosystem, innovation and risk-taking culture
– Most importantly positive interventions by the Government.

Huge Opportunities: Tailored Solutions

Assisted Digitization is practical due to the massively outsized technological breakthrough called ‘India Stack’ spearheaded by iSpirt. India Stack is a set of Application Programming Interfaces (APIs) that allows governments, businesses, startups and developers utilize the unique digital infrastructure to solve India’s difficult problems through omni-present, paperless, and cashless service delivery. It is open, free and comes with a user-friendly interface. India Stack allows development of technology for Assisted Digitization to be simple, implement rapidly, at less cost and low risk.
So far as the non-metro consumers are concerned, they expect assistance from a local and familiar entity that enjoys their trust. The assistance has to be face to face and in the local language with a local context. Such consumers expect assistance in product selection, placement of orders, receipt of products, collection of money, post-sale support etc.

The Success of a Start-up: StoreKing

StoreKing deserves a special mention here. Sridhar Gundaiah, Founder & CEO of Store King understood the expectations of rural consumers. Coming from a rural background, he knew the real pain points of technology and built a company to address them. The consumers also expect to be insulated from using online devices and applications, payment through credit/debit cards, an address to receive the product ordered and initial support to use the product etc.

Sridhar identified neighborhood rural retailers or kirana shops to be the assistance providers as they form part of the rural environment. In effect, Sridhar made these retailers into an online super market offering a host products and services to rural consumers hitherto shut out due to physical barriers.

The key to the success of StoreKing is a process to identify local kirana shops, train them to be assistance providers, support them with right set of products and make them local interface to StoreKing. Today StoreKing has over 30,000 outlets and has plans for scaling aggressively.

The Data Treasure

Another interesting aspect of Assisted Digitization is business model innovation. The companies that offer Assisted Digitization have access to troves of data emerging from millions of transactions conducted. For example, data can be gathered on products sold, pricing variations, buying behavior, demographics, brand loyalties, etc. The data patterns offer tremendous insights that can be leveraged by brand owners and distribution intermediaries to predict demand, identify aspirations, plan production and come up with attractive marketing propositions. There are ample opportunities to monetize data from rural markets which remained impregnable to marketers until now.

Digital India Initiative of Government of India

The single prime factor that is driving the digital transformation, besides technology, is Government of India’s initiatives for Digital India comprising Aadhaar, JanDhan and Mobile. By promoting innovative programs like BHIM and Aadhaar, Government is creating an environment that is inclusive and efficient.

In Conclusion

The rapid and overwhelming advances in digital technologies will soon reach hitherto underserved market segments like rural or non-metro consumers through Assisted Digitization. This trend will open up huge business opportunities for start-ups and enterprises alike.

In the next article, I shall dwell on how Micro, Small and Medium Enterprises (MSMEs) are leveraging Assisted Digitization.

Authored by:
Dr Sridhar Mitta

Demand-Supply Gap in Talent Sourcing in Indian IT and ITeS industry

The Indian Information Technology (IT) industry, along with IT enabled Services (ITeS), has evolved rapidly over the last three decades. National Association of Software and Services Companies (NASSCOM) pegs the total revenues garnered by the Indian IT industry at USD 118 billion for FY 2014 and estimates that the industry directly employs over three million graduates, primarily engineering graduates

However, NASSCOM also foresees a talent crunch given that the talent pool required to meet projected demand is around 250,000 graduates per year.

This appears to be a fallacy in a country with a population of 1.2 billion that boasts one of the largest pool of graduates.

Let us analyze the situation.

There are over 4000 engineering colleges in India governed by All India Council for Technology Education (AICTE). It mandates that these colleges should have requisite infrastructure and facilities such as adequate land, buildings, computers, bandwidth, electric power etc. which many colleges do have. The quantity and quality of teaching staff, though, could do with improvement.

Students are selected based on their school examination scores and their performance in the state/institution run competitive examinations. A minimum threshold of quality among students is thus assured. Selected students spend four years of intensive study, all administered in English to increase employability. The total number of engineering graduates passing out is around 750,000 per year.

And yet, it is estimated that not more than 20% of these graduates are employable by the IT/ITeS industry. Why?

Zinnov Management Consulting Pvt Ltd., recently conducted a study of the talent flow through various filters before employability in the IT/ITeS industry (see the chart).

Only ~20% of the engineers flow through various filters before
employability in the IT / ITeS industry

India’s top 25 institutions such as IITs and NITs produce roughly 15,000 graduates per year; less than10, 000 engineers take up with the IT industry.

Next, 125 ranked institutions provide about 100,000 graduates and contribute about 30,000 engineers. We can assume that the top 150 colleges are located in Tier I cities (or nearby) while the remaining colleges are primarily established in Tier II and III small towns and rural areas. Though they graduate over 500,000 candidates, a mere 80,000 of them qualify to meet industry standards. Interestingly, not all of these 80,000 graduates from small towns make it to the IT employment.

It is pity that though there exists a great demand for talent, the supply from Tier II and III cities remains unutilized. The reasons for this anomaly can be attributed to geographical distance, gender inequality and social constraints.

Investments have been made by students, parents, colleges and the state in making these students qualified engineers. The resources spent are wasted and as an industry, we miss business opportunities by not employing them.

Why can’t the IT industry, which makes a living by offering services from locations in Indian cities to companies in distant countries, devise innovative business models by unlocking the potential in small towns?

In an earlier post, we explored some of the reasons for the demand-supply gap in talent sourcing in the Indian IT/ITeS industry. In this second post in the series of three, we uncover some of the challenges faced by graduates from Tier II and III towns and rural areas in India, in finding employment

Disruption of the old order

Till recently, agriculture was the mainstay of the Indian economy and a primary source of livelihood for the majority of Indians living in small towns and rural areas. For reasons too numerous and varied to investigate here, agriculture has become a risk laden proposition and an un-remunerative one at that, plunging many farmers into debt traps.
Migration to urban areas ensued and agricultural workers began bulking up employment rosters at factories and other industrial venues for blue collar jobs that called for little to no educational qualifications. Over time, as the Indian economy entered a rapid growth phase, we began to see a demand for services and white collar jobs emerge. These required some educational training – at the very least, a college degree was needed.
Today, as India is on its way to become a knowledge economy, higher skills and qualifications are being called into the market. Industries such as IT and ITES demand computer proficiency in addition to degrees in engineering or science.
The lure of high pay, comfortable working environments, quick career growth and overseas assignments proves irresistible and influences parents and students alike to opt for such courses

Gearing up to ride the IT wave

People from small towns too see this as a great opportunity. Personal sacrifices are made and ends made to meet frugally, as parents scrape together enough to send their wards to colleges or cities nearby. The IT industry suddenly provided economically disadvantaged people with an option to hoist themselves out of the cycle of poverty they were stuck in.
The transformation is also aided by the rapid proliferation of a large number of engineering colleges in small towns and the progressive policies adopted by several state governments in providing financial assistance. Many students graduating from such colleges are first generation graduates in their families.
Today however, only a small proportion of the three million graduates employed by the IT- ITeS industry in metro cities come from Tier II and III small towns – a mere fraction of the students graduating from these towns. Let us explore why.

Stacked odds

IT companies and large Multi-National Corporations restrict their campus selections to a few hundred premier colleges located in large cities or metros, thereby limiting opportunities for selection.
Educational institutions in Tier II and III towns are further disadvantaged by the lack of advanced infrastructure and the highly qualified teaching staff found in city colleges. While the medium of instruction is usually English in such institutions, limited exposure to the language outside this environment often results in low proficiency levels in the language. This, coupled with low exposure to soft skills stacks the odds against the students.
Other parameters that come into play include gender dynamics and social mores. Women constitute 40% of the seats in professional courses in small towns. While most of their male counterparts can easily migrate to cities after graduation, social compulsions influence the women’s decisions to remain where they are – parents often do not consent to send their daughters to cities even when the girls are offered jobs with reputed institutions. Other students who face similar constraints include those with physical disabilities and those belonging to poor families.

Relocation: A new set of challenges

As graduates from small towns move to large cities for employment, an entirely new set of problems await them. A significant amount of their earnings are deployed towards accommodation, transport and other daily expenses, leaving very little to send back home for loan repayments or supporting their families. Add emotional alienation to the equation and you’ll find many students opting to go back.
The net result of all these factors is that a large number of graduates in science and engineering from small towns are not in the race for growing employment opportunities located in urban centres thus increasing the demand supply gap in talent sourcing for IT/ITeS industry
In my next article, I will present an innovative business model to employ the pool of graduates from small towns without uprooting them from their homes. I believe that such models can be rewarding economically and socially for the IT-ITeS industry.
Authored by:
Dr Sridhar Mitta